THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

SOLEDAD O'BRIEN, CNN ANCHOR: That's what you're hearing is gunshots, a raging inferno, too. Late word this morning of charred remains all inside a lakeside cabin where a killer ex-cop alleged to be a killer made his dramatic last stand.

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BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We know what needs to be done.

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JOHN BERMAN, CNN ANCHOR: As he begins his second term, President Obama issues a challenge to Congress: finish the job. We are live in Washington this morning taking the pulse and checking the facts.

ZORAIDA SAMBOLIN, CNN ANCHOR: Getting to do something that no other Pope has ever gotten to do: a farewell tour. This morning, making his first public appearance since announcing his retirement.

Good morning to you. Welcome to EARLY START. Nice to have you with us. I'm Zoraida Sambolin in New York.

O'BRIEN: And I'm Soledad O'Brien in Washington, D.C. You're watching a special edition, an early edition, of EARLY START this morning.

BERMAN: And I'm John Berman. It is 6:00 a.m. in the East right now, and we are live in the nation's capital where just a few hours ago President Obama challenged Congress to act in his State of the Union address. But signs of disunion may be more apparent than ever.

There was also a response from Senator Marco Rubio, the Republican, has a lot of people talking. We will have reaction. We're also going to see what they got wrong.

But first, there is another major, major developing story right now, so let's get straight to that.

O'BRIEN: Yes. Let's focus on the dramatic developments overnight in the manhunt for Christopher Dorner. Police now say that they found charred remains in a burned out cabin this after a shoot-out near in this cabin near Big Bear Lake in California.

Dorner allegedly shot two more officers, killed one of them, before he barricaded himself in the mountains. His 10-day reign of terror through the Los Angeles area apparently ended when a SWAT team detonated a smoke device inside the cabin, set it on fire.

This hour, we still don't have any positive confirmation of Dorner's death, though. Police have spent nearly a week frantically searching all of Big Bear. Kyung Lah has a look now at how they finally were able to corner the suspect.

A cabin burning to the ground, and fugitive ex-cop Christopher Dorner believed inside.

After six days of combing through Big Bear, the first Dorner report came midday. "The L.A. Times" reports two maids cleaning a home were tied up. Their car stolen.

The first law enforcement to spot the suspect in the stolen car were two Fish and Wildlife officers.

PATRICK FOY, CALIFORNIA FISH AND WILDLIFE: First was a purple Nissan which he ultimately appeared to have been driving too fast, lost control of the vehicle, crashed it. Carjacked the second white pickup, and then was fleeing the scene which is when our warden noticed him. They were so close that he recognized his face.

LAH: Suspected cop killer Christopher Dorner. The suspect opened fire, 15 shots, hitting the patrol car, narrowly missing the officers. They chased the truck to this cabin. As they began their approach, the man inside opened fire.

(GUNFIRE)

LAH: The gun fight captured by a local news reporter's cell phone.

(GUNFIRE)

LAH: Radio calls from the officers.

Then the heart sinking call.

UNIDENTIFIED MALE: Officer down, officer down.

UNIDENTIFIED FEMALE: Copy. We have an officer down.

UNIDENTIFIED MALE: Medic ship (ph) in the air, medic in the air. Another officer down.

UNIDENTIFIED FEMALE: Another officer down.

SHERIFF JOHN MCMAHON, SAN BERNARDINO COUNTY: One of our deputies was injured. He's being treated here at Loma Linda. And unfortunately, one of our deputies passed away as a result of his injuries.

JODI MILLER, SHERIFF SPOKESMAN: All law enforcement agencies is a brotherhood. So this is a very difficult day for law enforcement.

LAH: Law enforcement closed down all roads in and out, searching cars leaving the mountain.

Back at the cabin, officers saw no one leave.

Then this --

CINDY BACHMAN, SHERIFF'S SPOKESWOMEN: The person that barricaded himself inside the cabin and engaged in gunfire with our deputies and other law enforcement officers is still inside there.

LAH: The cabin burned to the ground. The suspect believed still inside.

San Bernardino sheriff's department confident enough to drop the road blocks even as they wait for DNA identification. The LAPD's largest manhunt has come to an end.

Kyung Lah, CNN, Los Angeles.

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BERMAN: And, again, the news late this morning, charred remains have been found inside that cabin. They have yet to be identified, however.

We also have some new details this morning about how officers were able to track Dorner down, following the frantic 10-day search.

Paul Vercammen is live from Big Bear, California, this morning. Paul, police were focusing on that resort area for about a week. So how did they get their break?

PAUL VERCAMMEN, CNN CORRESPONDENT: Well, they sure were, John and they were actually combing the area, looking in empty cabins for Dorner. There are just so many of them up here. Well, probably to his shock, from what we understand, two maids go in to clean one of these cabins and there he is, the fugitive on the run, the man on the rampage.

So Dorner steals their car, heads down this Highway 38. Fish and Wildlife officers spot Dorner and he's following two school buses, almost on the bumper of one of them, using the buses for cover. They radio in for help.

Some other Fish and Wildlife officers spot the car, head down toward Dorner, he crashes that car, steals a pickup truck. Let's listen to the Fish and Game Department talk about just exactly what happened at that point in the story.

(BEGIN VIDEO CLIP) FOY: The warden who was in front noticed a white truck coming down, driving erratically at a pretty high rate of speed. He was drawn to this erratic behavior. He took a close look at the driver and recognized him as the suspect.

Before he even had a chance to put it out over the radio, of course, they are driving now in opposite directions again. So he's already passed the suspect vehicle. The suspect rolled his window down and when the second patrol truck came up with two are wardens inside. That's when he engaged in shooting with our wardens as they were driving.

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VERCAMMEN: And we should note that those Fish and Wildlife wardens were unhurt. Then Dorner goes down the street and gets himself inside that cabin where by all intents and purposes, he meets his fiery end -- John.

BERMAN: All right, Paul Vercammen out in Big Bear, California, covering this developing story for us. Thanks, Paul.

We want to move on now to the president's State of the Union address, the president laying out his vision for a second term last night and he was challenging Republicans to work with him. The speech seemed to hit home with a majority of Americans.

The CNN/ORC poll found that 53 percent had a very positive reaction, 24 percent were somewhat positive and 22 percent reacted negatively. Still, a majority of speech watchers, 53 percent said they do not believe this will lead to more bipartisan cooperation. Sort of glass half full, glass half empty.

CNN White House correspondent Brianna Keilar is here with us now to talk about the speech.

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: I think some of those polled might be on to something, John. President Obama talked a lot about the economy. He said that deficit reduction alone is not an economic plan and, with some echoes of the campaign, he talked about investing in the middle class through education, clean energy investments, and an increase in the minimum wage. Economic measures that quite swiftly Republicans rejected.

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OBAMA: We can say with renewed confidence that the state of our union is stronger.

KEILAR (voice-over): In the first State of the Union address of his second term, President Obama unveiled a slate of new proposals aimed at improving the lives of the middle class, taking on everything from universal preschool education to repairing the nation's aging infrastructure to addressing the threat of climate change.

He urged Congress to put partisan differences aside on the image of immigration and to stay focused on a plan to jump start the nation's lethargic economy.

OBAMA: The American people have worked too hard for too long, rebuilding from one crisis to see their elected officials cause another.

KEILAR: Renewing an unfulfilled promise from his first presidential campaign, Obama asked Congress to increase the federal minimum wage to $9 an hour.

OBAMA: Let's declare that in the wealthiest nation on earth no, one who worked full time should have to live in poverty. Let's tie the minimum wage to the cost of living so that it finally becomes a wage you can live on.

KEILAR: In the moment of the night, the president called on Congress to vote for tougher gun legislation, stepped up background checks and an assault weapons ban.

OBAMA: Gabby Giffords deserves a vote. The families of Newtown deserve a vote. The families of Aurora deserve a vote.

KEILAR: On national security, the president warned of the threats posed by enemy hackers, announcing new measures to increase information sharing and adding long sought details on the pace of the drawdown in Afghanistan, he announced plans to bring home nearly half of the troops serving there by this time next year.

OBAMA: Another 34,000 American troops will come home from Afghanistan. This drawdown will continue and by the end of next year, our war in Afghanistan will be over.

KEILAR: How will up of this be paid for? The president vowed.

OBAMA: Nothing I'm proposing tonight should increase our deficit by a single dime.

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KEILAR: There was no price tag, however, though the White House says the dollars and cents will be fleshed out when the president unveils his budget next month. And now it's really time to sell this plan.

He heads to Asheville, North Carolina, today, Atlanta tomorrow, and he'll go home to Chicago on Friday, which is something that a lot of people will pay attention to because that's where he'll be talking about gun violence.

O'BRIEN: And he's been kind of silent on gun violence, frankly, in his home state and his home city, so that is going to be something very interesting to watch.

KEILAR: It's certainly gotten a lot more attention with the First Lady going to Hadiya Pendleton's funeral last Friday, and now he's heading home. He sort of mentioned it a little bit in speeches the violence there, but this is really I think going to bring it home.

O'BRIEN: All right, Brianna, thank you.

Republican Senator Marco Rubio gave the Republican response to the president's State of the Union address. Among Republican voters who took the dial test, how we measure what people think of the speech. The senator, Rubio, scored his highest marks when he talked about big government. Here is what he said.

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SEN. MARCO RUBIO (R), FLORIDA: The idea that more taxes and more government spending is the best way to help hard-working middle class taxpayers, that's an old idea that's failed every time it's been tried. More government isn't going to help you get ahead.

It's going to hold you back. More government isn't going to create more opportunities. It's going to limit them. And more government isn't going to inspire new ideas, new businesses and new private- sector jobs. It's going to create uncertainty.

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O'BRIEN: Republican Senator Rand Paul gave the Tea Party response. He chastised both parties for spending too much. Here is what he said.

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SEN. RAND PAUL (R), KENTUCKY: It is often said there is not enough bipartisanship up here. That's not true. In fact, there's plenty of bipartisanship. Both parties have been guilty of spending too much, of protecting their sacred cows, of backroom deals in which everyone up here wins, but every taxpayer loses.

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BERMAN: Coming up after the break, we're going to ask this question: Did the president build bridges or did he burn them? We will have analysis from Republican Congressman Tim Huelskamp of Kansas.

O'BRIEN: Also it was a cruise to remember in absolutely, positively, every bad way. The ship now adrift with tug boats trying to bring it to safety. Bathrooms that didn't work. Some light at the end of the tunnel to tell you about, though, this morning with a live report straight ahead.

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O'BRIEN: Welcome back, everybody. President Obama opened his State of the Union speech last night by quoting another Democratic president from half a century ago. Here is what he said.

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OBAMA: Fifty one years ago, John F. Kennedy declared to this chamber that the Constitution makes us not rivals for power, but partners for progress. It is my task, he said, to report the state of the union. To improve it is the task of us all.

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O'BRIEN: Well, rivals or partners? For all of the talk of bipartisanship, the president's address, the parties remained sharply divided on a number of issues. A CNN/ORC poll conducted after the speech showed 39 percent of folks polled thought it would lead to more bipartisan cooperation. The 53 percent said they thought it would exactly the opposite.

To talk about that, let's get to Kansas Republican congressman, a member of the Tea Party caucus as well, Tim Huelskamp.

It's so nice to have you with us. Appreciate it. Overall, what was your assessment of the president's speech last night?

REP. TIM HUELSKAMP (R), KANSAS: More of the same. We have a long laundry list of things the president would like to do, but I didn't see many solutions for problems with debts and deficit. No real plan there. And no real plan to get 22.7 million Americans back to work.

It seemed more of the same and I was looking for real solutions, and didn't see many of those last night.

O'BRIEN: Let's play a clip of what he said about bigger government. I picked this one because of what we heard from Marco Rubio, with the Republican response, also talked about the size of government.

But let's start with what the president said first.

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OBAMA: Tonight, I'll lay out additional proposals that are fully paid for and fully consistent with the budget framework both parties agreed to just 18 months ago.

Let me repeat: Nothing I'm proposing tonight should increase our deficit by a single dime. It is not a bigger government we need, but a smarter government that sets priorities and invests in broad-based growth.

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O'BRIEN: He seemed to be saying bigger government versus smarter government. And we heard from Marco Rubio was sort of bigger government versus smarter government. What do you think about not raising the deficit for even a dime?

HUELSKAMP: We're looking for the details the president has laid on his budget the fourth time out of five cycles, supposed to be presenting that. We'll look at the details.

But when you run a trillion dollar deficit, there was no plan to reduce that deficit I heard last night and we've got a $60.5 trillion debt. He's added $6 trillion in four years. I look forward to any proposal that would reduce that. But I do know what he will propose. He didn't specifically outline those, but another tax increase. He is obsessed with raising taxes and I presume that he will unveil as another tax increase proposal.

BERMAN: He offered Medicare cuts of about $400 million, he's talked about that before. He also said, though, that cutting deficit is not an economic plan.

O'BRIEN: You can't cut your way to prosperity.

BERMAN: You can't cut your way to prosperity.

HUELSKAMP: Well, I think we have to reduce the deficit. You can't spend your way to prosperity, you can't tax your way. He got his big tax increase last month. We're still looking at massive deficits. We're still looking potentially at a downgrade of our credit rating and these are serious times requiring serious proposals.

The Bowles-Simpson commission for reducing spending on Medicare, I mean, he didn't take any of those proposals and lay those out last night. That would have been a great time to do that. Our health care costs still continue to increase. Premiums are going up. I hear from constituents, still talking about 25 percent to 30 percent. Small businesses under fire, they're not hiring people.

I think we need a big plan to get the economy growing, and actually, it's a pretty simple approach. Marco Rubio outlined that.

We don't need a massive government program. We need fewer regulations. Some more certainty out of Washington, I did not hear that last.

O'BRIEN: You know, it's interesting to hear, excuse me, from the -- at "The Los Angeles Times" talked a little bit about the issue we started with, which was bipartisanship. Most people don't think the speech made any big steps toward bipartisanship.

Leaders have to do more to set the right goals. They have to find ways to achieve them. There, Obama's course, they write is unclear. In the first time, he courted Republican support, was rebuffed. In his inaugural address, he suggested a new approach: rallying the public in support of common values, transcending bipartisan values. This speech extended that idea, but achieving it won't be easy.

What do you think about the strategy? I mean, we've certainly seen that on gun control, right? Rally the public. The public in turn rallies their elected officials and that how you get some kind of progress if dealing across the aisle doesn't work.

HUELSKAMP: Well, it's hard to rally folks around the speech to actually put it into law. And there are no specific proposals. I mean, no deficit reduction targets. No outline how you would reduce medical costs that are still going out of control. Now way how to pay for these plans. I assume he's going to again come up with a tax increase, another long laundry list of those items. But again, we have 22.7 million Americans either out of work, looking for work, or looking for more or have given up. And they didn't hear anything last night that will get the economy growing again. It went backward last quarter.

I mean, it's slowest it's been since he took office. And we need it turn that around. I saw no plan to do that last night.

BERMAN: Quickly, minimum wage, for or against raising it?

HUELSKAMP: I'm not against -- I am against raising that to federal level. I think that should be -- the way we get people to receive more money is we give them jobs. And we have the worst recovery since the Great Depression and raising minimum wage for 22.7 million Americans without work is no solution.

O'BRIEN: Congressman Tim Huelskamp, Republican from the state of Texas, nice to have you with us. We appreciate your time this morning.

HUELSKAMP: Thank you. Nice to be here.

O'BRIEN: And in just about 15 more minutes, we're going to have more speech analysis. Don Baer is going to join us. He's a former White House communications director. He served under President Clinton.

BERMAN: We'll have more on the State of the Union. But, first, there are so many other big stories developing right now. We want to go back to New York. Zoraida Sambolin is there.

Hey, Z.

SAMBOLIN: There is a lot going on. Good morning.

Two tug boats are moving the doomed cruise ship crippled by an engine fire in the Gulf of Mexico to a port in Alabama. If sea winds don't cooperate, though, it could mean passengers and crews are stuck in another day for with what they're calling deplorable conditions, including sloshing sewage and a dwindling food supply. But if all goes well, which we hope happens, the ship is expected to arrive in Mobile, Alabama, on Thursday.

Pope Benedict XVI celebrating his last public mass today on Ash Wednesday. But before mass, at St. Peter's Basilica, he greeted thousands of faithful who gathered at the square this morning, thanking them in several languages and also mentioning his decision to step down, saying it would be inappropriate to stay on.

You know, he's going to hold his final audience in Vatican City at St. Peter's Square on February 27th. For all of those that are in the area and want to see him one final time.

O'BRIEN: And those who are watching remotely as well.

SAMBOLIN: Yes.

O'BRIEN: All right. Zoraida, thank you.

The president talked about raising his minimum wage in his State of the Union address. We were just talking to Congressman Huelskamp about that. We'll talk a closer look at that plan right after this short break. We're back in just a moment.

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BERMAN: We are minding your business this morning. Your money was a big topic in President Obama's State of the Union address.

O'BRIEN: And, in fact, he called for Congress to raise the minimum wage.

Our Christine Romans has a look at that some of the details of that from last night. Hey, Christine. Good morning.

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Hi, guys. That was a big surprise. You know, a lot of people knew he was going to focus on jobs, but raising the minimum wage, a promise he made five years ago, and last night came the plan.

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OBAMA: Let's declare that in the wealthiest nation on Earth, no one who works full time should have to live in poverty and raise the federal minimum wage to $9 an hour.

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ROMANS: He wants to do that by the year 2015. He wants to peg it to inflation. That means when prices rise, prices for things you pay, your wages would automatically go up too.

Right now, the federal minimum wage is $7.25. That's about $14,000 a year if you work full time at minimum wage. Take a look. Most states adhere to that guideline or close to it. With a minimum wage in the $7 to $8 range, those are the blue states. Washington has the highest. It has a minimum wage of more than $9 an hour.

The president basically is calling for a 24 percent increase in the wage. It's a big jump that some big groups will push back on, no doubt. Their biggest argument? It will hurt jobs. Why? If they have to pay more for the workers they have, they won't be able to hire more people.

The Employment Policies Institute is an advocate for employers. It says more than 450,000 positions would be lost if the minimum wage went up to $9.80. The other side of the argument if the minimum wage kept up with inflation right now, it wouldn't be $7.25, it would $10 an hour.

Bottom line, raising the minimum wage, you guys, is always a big, ugly fight between business owners who say they can't afford it, especially now, and workers groups who say it's only fair. The last minimum wage hike, 2009. Right now, 3.8 million workers are making minimum wage. I suspect you will see a lot of pushback from small business, too, you guys. They will say, wait a minute, we have to now pay for health insurance for our workers and raise the minimum wage, we can't afford all that.

O'BRIEN: It's always an ugly fight. It always -- I refer to 2009, and many times before that as well.

All right. Christine, thank you.

ROMANS: You're welcome.

BERMAN: So while you were sleeping, dramatic new developments in the hunt for an accused cop killer, shoot-out at a cabin, a grisly discovery at the scene overnight. We'll have a live report coming up.

O'BRIEN: And a story breaking overseas in just the last hour. Brand new phone hacking arrests have happened at Rupert Murdoch's now shattered "News of the World" tabloid. We'll bring you that as well.